Abstract : A novel variational method to evaluate the stiffness reduction and the internal stresses in laminates has been developed and has been applied to analysis of glass/epoxy and graphite/epoxy laminates. The method has been extended to evaluate thermal expansion coefficients of cracked laminates and also internal stresses due to temperature change. Results demonstrate the stiffness, Poissons ratio and the thermal expansion coefficients changes with crack density. In particular, it has been shown that the values of thermal expansion coefficients of cracked laminates also depend on the signs of load and temperature change. Internal stresses obtained convey important information about sources of continued internal failure. A comprehensive survey on damage in fiber composite materials has been prepared including classification of the various kinds of damage and description of methods of analysis. The differential scheme approximation for effective properties of composite materials has been modified and generalized to the case of cracked materials. The method is of general nature. Specific results have been given for stiffness reduction due to cracks for isotropic materials containing many randomly oriented elliptical or penny shaped cracks and for orthotropic (fiber composite) sheets containing many aligned cracks (along fibers). The method corrects serious shortcomings of the usually employed self consistent scheme.